Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Dominion Securities analyst Sam Crittenden detailed a looming shortfall in copper supply that should keep the commodity price higher.
“There is a looming supply crunch coming in the copper market: You have probably heard by now that the energy transition will require a lot of copper. An additional 1 per cent per year on our estimates which doesn’t sound like much but would be the equivalent of one large scale copper mine coming online every year.
We can debate demand projections, but it’s always been a supply story with an aging supply base, declining grades and quality projects becoming more scarce and harder to build for ESG reasons … We think this potential supply deficit is filled partially by increased scrap and substitution/thrifting of copper but largely through a supply response from the copper mining industry which likely requires a period of high copper prices.
We forecast copper prices of $4.50/lb from 2025-2027 for this reason which could be conservative if supply struggles to respond … Quality shovel ready projects are scarce and getting more difficult to build: When we look at the list of available copper projects it’s notable that there is a lot of copper out there but a lot of it may never come out of the ground.”
Mr. Crittenden lists First Quantum Ltd. [disclosure: I personally own a position in FM], Ivanhoe Mines Ltd., Hudbay Minerals Inc. and Lundin Mining Corp. among the miners that will benefit from the trend.
BofA Securities investment strategist Michael Hartnett recounted the results of the firms’ monthly survey of global fund managers (FMS) in his typically blunt style,
“Pain trade for risk assets still up; true FMS cash levels lowest (5.1 per cent) since Jan’22 but investors cut commodities to 3-year lows, still UW [underweight] stocks … Fed cuts punted to Q4/Q1 and inflation expectations sink to 28-year low … AI: impact of AI adoption next 2 years = bullish … 40 per cent say higher profits, 2 per cent say more jobs, 14 per cent higher profits & jobs, 29 per cent say AI won’t increase profits or jobs … onsensus = ‘soft’ landing (64 per cent) not ‘hard’ (26 per cent) or ‘no’ (3 per cent) … most crowded trade = long Big Tech (55 per cent), then short China; investors now long Japan (19-month high), reduce UW in US (6-month high), stay long tech, rotate to health care, banks, value>growth, and cut exposure to energy & staples”
“BofA fund manager survey summary” – (research excerpt) Twitter
Citi U.S. equity strategist Scott Chronert is cautious for the remainder of 2023,
“We are maintaining a full-year S&P 500 target of 4000. While acknowledging we missed the AI euphoria to grip Mega Cap Growth cohort, lack of concrete earnings revision support implies a digestive phase during 2H. Recession risk remains high and is a related headwind. We are constructive on 1H 2024 prospects and establish a 4400 mid-year target for the S&P 500. Earnings remain resilient, but a more material pickup is probably a 2H 2024 circumstance”
Diversion: “Canada’s largest port places 2nd last in global efficiency ranking” – CBC
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